By on October 26, 2009

Knives out.... (courtesy:ozcam.net.au)

$413 million isn’t a ton of money for one of the largest global automakers, but GM’s purchase of Daewoo’s entire share offering still doesn’t completely add up. After all, GM was barred from spending US taxpayer bailout money on overseas assets. And it’s not like GM wanted to increase its stake from 51 percent to 70.1 percent; GM-Daewoo tells Reuters GM had to step in with the cash when the Korean Development Bank, SAIC and Suzuki declined to participate in the rights offering. But under which sofa did GM find the cash? “The money came from GM’s global operations,” is all Daewoo’s reps will say about the matter. And though we could criticize GM for starving its overseas operations in order to keep the wolf from Daewoo’s debt-riddled door, the reality is that few of GM’s divisions are as important as Daewoo for GM’s global product development now that Opel is on the way out the door. The real problem is that this outlay is hardly the last one GM will have to make in order to keep its small-car development hub.

GM’s $413M will be used for “general purposes, including funding the repayment of maturing debt,” according to Daewoo spokesfolks. And they’re already talking about the next round. “Any further actions related to the longer term funding structure of GM Daewoo will be considered if necessary,” is the good word. And it will be necessary. Daewoo owes the Korean Development bank about $2B, and had been negotiating for another $1B in loans. But now that the KDB’s Daewoo stake has been reduced from 28 percent to 17 percent, there’s incentive for the bank to keep funding the struggling automaker. Especially since GM apparently hasn’t agreed to KDB’s key terms, including the size of the rights offer (it was supposed to be closer to $800M . . . what does that tell you?), the sharing of jointly-developed platform licenses and a bank-appointed CFO. And though a $413M bailout is worth the price for GM right now, that was just a stop-gap. If Daewoo is going to be worth anything going forward, GM has to not only handle Daewoo’s debt, it also has to jump-start development work. Now GM gets to learn the lesson it already taught US taxpayers: one bailout usually leads to another. But where’s the money going to come from?

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10 Comments on “GM Buys Up Daewoo Share Offering, Increases Stake to 70 Percent...”


  • avatar

    This is BS. Shuffling money back and forth between different corporate entities is called money laundering where I came from.

    A year ago I ask why was GM North America holding out a tin cup when their oversea operations were hauling cash around in wheel barrows.

  • avatar

    This is BS. Shuffling money back and forth between different corporate entities is called money laundering where I came from.

    A year ago I ask why was GM North America holding out a tin cup when their oversea operations were hauling cash around in wheel barrows.

  • avatar
    sitting@home

    GM’s $413m will be used for “general purposes, including funding the repayment of maturing debt,”

    So for all their cash they get nothing but time; no products, sales or marketing.

    the reality is that few of GM’s divisions are as important as Daewoo for GM’s global product development now that Opel is on the way out the door

    Of the re-badged imports, given the choice between a Saturn Astra or a Chevy Aveo I know which one I’d buy every time. But I guess in the long term GM thinks it can create a better business model from South Korean rather than West European labor and is assuming that the soul will be sucked from any small car they offer in the US no matter where it was designed.

  • avatar
    SherbornSean

    To my ears, it sounds like a pretty cheap way to prop up the South Korean economy. Cheap compared to the costs of keeping 60,000 of our best young workers sitting around staring at a DMZ for 40 years.

  • avatar
    Conslaw

    Commando writes:

    This is BS. Shuffling money back and forth between different corporate entities is called money laundering where I came from.

    Where I come from, it’s called, “zeebadeebadobacadoweenatchwoowee”. What can I say? We have a weird dialect.

    Seriously, GM has gotten a better bang for its buck out of its Daewoo engineering tnan from any of its other divisions. More money spent there is probably a good thing.

  • avatar
    John Horner

    Asia is the future of the auto making and selling business and for the moment, Daewoo is a key element of GM’s strategy in Asia. GM doesn’t dare rely solely on its Chinese joint ventures because it doesn’t actually control those joint ventures.

  • avatar
    CyCarConsulting

    A U.S. company focusing on every other country than this one, with tax payer dollars. Sweet!

  • avatar
    Maverick

    GM is a global enterprise and >50% of its revenue comes from business units outside the U.S. So, of course, it needs to fund/build/grow those operations.

    That being said, it seems like to me that GM executives are back to their old games. At least under Govt control, they finally made the tough decisions (e.g. dump old brands, dealers, etc.).

    But what do you expect? It’s the same old executives who got GM into this mess in the first place, along with the same old Detroit thinking.

    I think Steve Ratner called it ‘friendly arrogance’. Well said.

  • avatar
    Robbie

    @CyCarconsulting

    Our tax dollars are not helped by giving GM communist-style directives on how to run their business. If we start forcing GM to make bad business decisions, then Obama will need to start writing even bigger checks.

    GM apparently feels it needs some engineering capability after the loss of Opel, so this may very well be a sensible decision.

  • avatar
    pista

    So does Daewoo no longer belong to Holden or is that who “paid” the money?


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